Author Topic: Irrational - insurance questions  (Read 5260 times)

auntbecky

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Irrational - insurance questions
« on: November 21, 2013, 12:39:46 PM »
Quote
I try to replace emotion with the more rational friend of statistics when deciding whether I should invest money, buy a more full-coverage type of  insurance, or take any other form of risk. --MMM

This is timely for me as I'm getting quotes on auto and home owners' insurance coverage.  Is more better?  Is an umbrella policy a good idea?  What coverage is the right amount for me right now as I'm digging out of debt and have little in the way of assets.  Does this change in two years when I have only mortgage debt and growing investments?

Frankies Girl

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Re: Irrational - insurance questions
« Reply #1 on: November 21, 2013, 04:00:37 PM »
Good questions. My non-professional opinions... insurance is a gamble. The chances of you having an accident, or having a tree fall through your living room or worse - hitting someone and injuring/killing them are hopefully small. But you still need to carry insurance due to the fact that it COULD happen. I hate paying out more money for the extremely unlikely event of those possibilities, but it's weighing what your personal risk level is, what you actually have to protect and what you can afford to do. So you should start with taking a hard look at what sort of risk factors you actually have, and how comfortable you are getting bare minimums vs. the peace of mind that comes from having higher coverage.

Is more better? 
Not always. In your case, I'd say get the minimum in coverages, but keep in mind that YOUR minimum is what you'd need to be able to replace your car/house in the event of losing everything. If you're in debt, then carrying a super high deductible probably isn't a good idea as in the hopefully unlikely event that you totaled your car, you'd probably have difficulties coming up with the deductible if it was thousands. You also probably should consider bumping up your liability coverage when you can, and as your assets grow. I've just recently realized I needed to do this.

Is an umbrella policy a good idea? 
Probably, but maybe not until you have a large amount of assets to protect. I've seen several posters discussing umbrellas, and it does make sense if you're talking upwards of 500K to millions, since you don't want to be wiped out in the event that someone wins a settlement against you for millions... but regular insurance policies on home and car should be sufficient for most folks.

What coverage is the right amount for me right now as I'm digging out of debt and have little in the way of assets. 
Car wise, I would suggest set your deductibles as high as you can reasonable afford without putting yourself in a difficult position. Look up the blue book value of your car and if it's under $5K I would suggest dropping collision and take a HARD look at dropping comprehensive if you have both of those. If you have health insurance already, don't do the personal injury protection. 

House insurance - you don't want to skimp too much on that, but take a good look at the deductibles. Keep in mind as soon as you do dig out of the debt and start getting your emergency fund that can handle the higher deductibles, you can go adjust your car/home deductibles at any time.

I think one of the biggest things to remember is to check around and get several quotes and bundle your car and homeowner's insurance for the discounts.

« Last Edit: November 21, 2013, 04:04:31 PM by Frankies Girl »

the fixer

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Re: Irrational - insurance questions
« Reply #2 on: November 21, 2013, 04:38:23 PM »
Also note that you need to consider, in addition to replacement cost, whether you need to replace the item at all if it were lost. For instance, if you own a car purely as a pleasure vehicle and don't use it to get to work or run critical errands like buying food, you could get by without it and you'd be better off saving money by getting a cheaper premium on its insurance. If you have alternative options to get to work but drive at least some of the time, this is more of a gray area.

clarkfan1979

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Re: Irrational - insurance questions
« Reply #3 on: September 14, 2014, 06:30:37 PM »
Buy insurance for only want you can't cover. A $5000 deductible for your house only works if you have a $5000 reserve.

Leisured

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Re: Irrational - insurance questions
« Reply #4 on: September 22, 2014, 04:30:54 AM »
You do not insure your crockery against accidental breakage, because you can afford to replace a broken plate out of pocket. You cannot replace a house or car out of pocket. The more you are in debt, the more insurance you need. If you have investments and no debt, you are in a stronger financial position, and can afford to have slightly less insurance.

Rural

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Re: Irrational - insurance questions
« Reply #5 on: September 22, 2014, 05:38:32 AM »
You do not insure your crockery against accidental breakage, because you can afford to replace a broken plate out of pocket. You cannot replace a house or car out of pocket. The more you are in debt, the more insurance you need. If you have investments and no debt, you are in a stronger financial position, and can afford to have slightly less insurance.


If you can't replace a car out of pocket, you have bigger problems to consider than insurance. Auto insurance is for protection against lawsuits, not to buy a new car.


House, I'll grant you. Ours is still uninsured (unfinished), and it's a source of some worry,

GuitarStv

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Re: Irrational - insurance questions
« Reply #6 on: September 22, 2014, 06:08:11 AM »
You do not insure your crockery against accidental breakage, because you can afford to replace a broken plate out of pocket. You cannot replace a house or car out of pocket. The more you are in debt, the more insurance you need. If you have investments and no debt, you are in a stronger financial position, and can afford to have slightly less insurance.


If you can't replace a car out of pocket, you have bigger problems to consider than insurance. Auto insurance is for protection against lawsuits, not to buy a new car.

+1

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Re: Irrational - insurance questions
« Reply #7 on: October 17, 2014, 06:15:37 PM »
To me, umbrella liability policies are a very good deal.  Mine costs less than $200 a year.  For that, it covers me against losses from just about any lawsuit for any amount over $300K to $1M.  (The first $300K needs to be covered by your auto policy and by your homeowner's insurance for you to get the umbrella.)

 

Wow, a phone plan for fifteen bucks!